<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE CATO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[CATO Logo]
THE CATO CORPORATION
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held at the Home Office of the Company, 8100 Denmark Road, Charlotte, NC
28273 on Thursday, May 20, 1999 at 11:00 A.M., Eastern Time.
The Notice of the Annual Meeting of Stockholders and Proxy Statement
are attached. The matters to be acted upon by our stockholders are set forth in
the Notice of Annual Meeting of Stockholders and discussed in the Proxy
Statement.
We would appreciate your signing, dating and returning to the Company
the enclosed proxy card in the envelope provided at your earliest convenience.
We look forward to seeing you at our Annual Meeting.
Sincerely yours,
WAYLAND H. CATO, JR.
Chairman of the Board
Chief Executive Officer
8100 DENMARK ROAD
P. O. BOX 34216
CHARLOTTE, NC 28234
(704) 554-8510
<PAGE> 3
THE CATO CORPORATION
--------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
--------------------------------------------------
TO THE STOCKHOLDERS OF
THE CATO CORPORATION
Notice is hereby given that the annual meeting of stockholders of The
Cato Corporation (the "Company") will be held on Thursday, May 20, 1999 at
11:00 A.M., Eastern Time, at the Home Office of the Company, 8100 Denmark Road,
Charlotte, NC 28273, for the following purposes:
1. To elect five Directors to serve until their successors are
elected and qualified;
2. To consider and vote upon a proposal to ratify the action of
the Board of Directors in selecting Deloitte & Touche LLP as
the Company's independent auditors for the fiscal year ended
January 29, 2000, and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 26,
1999 as the record date for determination of stockholders entitled to notice of
and to vote at the meeting or any adjournments thereof.
By Order of the Board of Directors
MICHAEL O. MOORE
Dated: April 22, 1999 Secretary
- --------------------------------------------------------------------------------
STOCKHOLDERS ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN
FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
<PAGE> 4
THE CATO CORPORATION
8100 Denmark Road
Charlotte, North Carolina 28273-5975
--------------------
PROXY STATEMENT
--------------------
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of The Cato Corporation (the "Company")
for use at the annual meeting of stockholders of the Company to be held on May
20, 1999, and at any adjournment or adjournments thereof. This proxy statement
and the accompanying proxy card are first being mailed to stockholders on or
about April 22, 1999.
Only stockholders of record at the close of business on March 26, 1999
are entitled to notice of and to vote at the meeting. As of March 26, 1999, the
Company had outstanding and entitled to vote 21,198,119 shares of Class A
Common Stock ("Class A Stock") held by approximately 1,030 holders of record
and 5,264,317 shares of Class B Common Stock ("Class B Stock") held by 12
holders of record. The Transfer Agent estimates that there are approximately
3,626 shareholders in total. Holders of Class A Stock are entitled to one vote
per share and holders of Class B Stock are entitled to ten votes per share.
Holders of Class A Stock vote with holders of Class B Stock as a single class.
All proxies which are properly executed and received prior to the
meeting will be voted at the meeting. If a stockholder specifies how the proxy
is to be voted on any of the business to come before the meeting, the proxy
will be voted in accordance with such specification. If no specification is
made, the proxy will be voted FOR the election of Directors and FOR the
ratification of the selection of auditors. A proxy may be revoked, to the
extent it has not been exercised, at any time prior to its exercise by written
notice to the Secretary of the Company, by executing and delivering a proxy
with a later date or by voting in person at the meeting.
If you plan to attend and vote at the meeting and your shares are held
in the name of a broker or other nominee, please bring with you a proxy or
letter from the broker or nominee to confirm your ownership of shares.
In accordance with applicable Delaware law and the Company's Bylaws,
the holders of a majority of the combined voting power of Class A Stock and
Class B Stock present in person or represented by proxy at the meeting will
constitute a quorum. Abstentions are counted for purposes of determining the
presence or absence of a quorum. With regard to the election of directors,
votes may either be cast in favor of or withheld, and (assuming the presence of
a quorum) directors will be elected by a plurality of the votes cast. Votes
that are withheld will be excluded entirely from the vote and will have no
effect on the outcome of the election. Approval of the ratification of the
selection of independent auditors requires the affirmative vote of a majority
of the combined voting power of the Class A Stock and Class B Stock present in
person or represented at the meeting and entitled to vote. On any proposal
other than the election of directors, an abstention will have the same effect
as a negative vote but, because shares held by brokers will not be considered
entitled to vote on matters which the brokers withhold authority, a broker
non-vote will have no effect on the vote on any such proposal.
The Company will bear the expense of preparing, printing and mailing
the proxy statement to stockholders. The Company will reimburse brokers,
dealers, banks and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy solicitation materials to beneficial
owners of the Company's Class A Stock and Class B Stock and securing their
voting instructions. Corporate Investor Communications, Inc. has assisted the
Company in conducting the search for beneficial owners at a cost of
approximately $800.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 26, 1999, certain
information regarding the ownership of the outstanding shares of Class A Stock
and Class B Stock by (i) each director and nominee, (ii) each person who is
known by the Company to own more than 5% of such stock, (iii) executive
officers listed in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated in the footnotes
below, each stockholder named has sole voting and investment power with respect
to such stockholder's shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWEND (1)(2)
----------------------------------------------- PERCENT
CLASS A STOCK CLASS B STOCK OF TOTAL
------------- ------------- VOTING
NUMBER PERCENT NUMBER PERCENT POWER
--------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Wayland H. Cato, Jr. (3)(4) 3,371,823 15.7% 2,927,003 55.6% 44.1%
Edgar T. Cato (5) 1,719,965 8.1% 1,702,200 32.3% 25.3%
John P. Derham Cato (6) 299,608 1.4% 242,750 4.5% 3.6%
Clarice Cato Goodyear (7) 299,379 1.4% 190,515 3.6% 3.0%
Thomas E. Cato (8) 163,947 * 98,925 1.9% 1.6%
Howard A. Severson(9) 47,399 * - - *
George S. Currin 11,287 * - - *
James H. Shaw 10,500 * - - *
Robert W. Bradshaw, Jr. 500 * - - *
Grant L. Hamrick 3,000 * - - *
Paul Fulton 7,000 * - - *
A. F. (Pete) Sloan 3,200 * - - *
All directors and executive officers
as a group (17 persons) (10) 6,034,704 27.4% 5,161,393 96.2% 76.2%
The Crabbe Huson Group, Inc.(11) 1,704,036 8.0% - - 2.3%
</TABLE>
- -----------------
* Less than 1%
(1) Includes the vested interest of executive officers in the Company's
Employee Stock Ownership Plan. The aggregate vested amount credited to
their accounts as of March 26, 1999 was 51,685 shares of Class A
Stock.
(2) Share amounts shown as subject to stock options in the footnotes below
cover shares under options that are presently exercisable or will
become exercisable within 60 days after March 26, 1999.
(3) The business address of this stockholder is 8100 Denmark Road,
Charlotte, North Carolina 28273-5975.
(4) The amounts shown for Class A Stock include 2,997,516 shares held in a
limited partnership, 135,000 shares held by a private foundation,
20,600 shares held by a limited liability company, 2,000 shares of
Class A Stock owned by Mr. Cato's wife and 216,666 shares subject to
stock options. In the limited partnership are various trusts,
revocable and irrevocable. The trustee of each trust has sole voting
and investment responsibility with respect to these trusts. Mr. Cato
is a general partner in the limited partnership, a member of the board
of directors governing the private foundation and a member of the
2
<PAGE> 6
limited liability company. The amount shown for Class B Stock is held
in the same limited partnership of which Mr. Cato is a partner.
(5) The amount shown for Class A Stock includes 1,567,342 shares held in a
limited partnership in which Mr. Cato is a partner 10,926 shares held
by a private foundation and 141,666 shares subject to stock options.
The amount shown for Class B Stock is held in the same limited
partnership of which Mr. Cato is a partner. The address of this
stockholder is 3985 Douglas Road, Coconut Grove, Florida 33133.
(6) The amount shown for Class A Stock includes 3,000 shares held by Mr.
John Cato's wife and 9,900 shares subject to stock options held by Mr.
John Cato's wife. Mr. John Cato disclaims beneficial ownership of
shares held directly or indirectly by his wife. The amount shown for
Class A Stock includes 135,500 shares subject to stock options. The
amounts for Class B Stock include 100,000 shares subject to stock
options by Mr. John Cato and 400 shares subject to stock options by
Mr. Cato's wife.
(7) The amounts shown for Class A Stock and Class B Stock include 32,520
shares of Class A Stock and 22,500 shares of Class B Stock held by Ms.
Goodyear's husband. Ms. Goodyear disclaims beneficial ownership of
these shares. The amount shown for Class A Stock includes 97,500
shares subject to stock options.
(8) The amount shown for Class A Stock includes 4,200 shares of stock held
by Mr. Thomas Cato's children for which he acts as custodian or
trustee, and 570 shares of stock held by Mr. Thomas Cato's wife and
2,000 shares held in irrevocable trust. Mr. Cato disclaims beneficial
ownership of these shares. The amounts shown for Class A Stock include
72,000 shares subject to stock options. The amounts shown for Class B
Stock include 3,000 shares subject to stock options.
(9) Includes 44,750 shares of Class A Stock subject to stock options.
(10) The amounts shown for Class A Stock include 803,482 subject to stock
options.
(11) Based on Schedule 13G received by the Company from this stockholder on
or about February 12, 1999. The address of this stockholder is The
Crabbe Huson Group, Inc., 121 S. W. Morrison, Suite 1400, Portland
Oregon 97204. The amount shown represents shared investment power.
ELECTION OF DIRECTORS
The Board of Directors, consisting of 12 members, is divided into
three classes with terms expiring alternately over a three year period. As a
result of the expiration of the terms of five incumbent directors, a total of
five nominees are standing for election at the annual meeting. The five
directors whose terms expire at this year's annual meeting, Messrs. Wayland H.
Cato, Jr., Edgar T. Cato, Howard A. Severson, Robert W. Bradshaw, Jr. and Grant
L. Hamrick, have been nominated by the Board of Directors to succeed themselves
and to serve until the 2002 annual meeting and until their successors are
elected and qualified.
It is the intention of the persons named in the proxy to vote for such
persons for election to the Board of Directors for the ensuing periods as
described except to the extent authority to so vote is withheld with respect to
one or more nominees. Should any nominee be unable to serve
3
<PAGE> 7
(which is not anticipated), the proxy will be voted for the election of a
substitute nominee selected by the Board of Directors. The five nominees shall
be elected by a plurality of the votes of Class A Stock and Class B Stock
voting as a single class. The other seven members of the Board of Directors
will continue to serve in such capacity until their terms expire and their
successors are elected and qualified.
NOMINEES
Information with respect to each nominee, including biographical data
for the last five years, is set forth below.
Wayland H. Cato, Jr., 76, is Chairman of the Board and has been a
director of the Company since 1946. Since 1960, he has served as the Company's
Chief Executive Officer.
Edgar T. Cato, 74, is the Former Vice Chairman of the Board and
Co-Founder of the Company and has been a director of the Company since 1946.
Mr. Edgar T. Cato is the brother of Mr. Wayland H. Cato, Jr.
Howard A. Severson, 51, has been employed by the Company since 1985
and has served as a director of the Company since 1995. He currently serves as
Executive Vice President, Assistant Secretary and Chief Real Estate and Store
Development Officer. From August 1989 through January 1993, Mr. Severson served
as Senior Vice President - Chief Real Estate Officer.
Robert W. Bradshaw, Jr., 65, has been a director of the Company since
1994. Since 1961, he has been engaged in the private practice of law with
Robinson, Bradshaw & Hinson, P.A. and is a shareholder of the firm.
Grant L. Hamrick, 60, has been a director of the Company since 1994.
Mr. Hamrick was Senior Vice President and Chief Financial Officer for American
City Business Journals, Inc. from 1989 until his retirement in 1996. From 1961
to 1985, Mr. Hamrick was employed by the public accounting firm Price
Waterhouse and served as Managing Partner of the Charlotte, North Carolina
Office.
CONTINUING DIRECTORS
Information with respect to the seven continuing members of the Board
of Directors, including biographical data for the last five years, is set forth
below.
John P. Derham Cato, 48, has been employed as an officer of the
Company since 1981 and has been a director of the Company since 1986. He
currently serves as Vice Chairman of the Board, President and Chief Operating
Officer. Mr. John Cato is a son of Mr. Wayland H. Cato, Jr.
Thomas E. Cato, 44, has been employed by the Company since 1977, has
served as an officer since 1986 and has been a director of the Company since
1993. He currently serves as Vice President, Divisional Merchandise Manager.
Mr. Thomas Cato is a son of Mr. Wayland H. Cato, Jr.
Clarice Cato Goodyear, 52, has been employed by the Company since 1975
and has served as a director and officer of the Company since 1979. She
currently serves as Special Assistant to the Chairman and President and as
Assistant Secretary. From March 1987 through
4
<PAGE> 8
July 1993, Ms. Goodyear held senior administrative, operational services and
human resources positions in the Company; she served as Executive Vice
President, Chief Administrative Officer and Assistant Secretary from May 1992
through July 1993. Ms. Goodyear is a daughter of Mr. Wayland H. Cato, Jr.
George S. Currin, 62, has been a director of the Company since 1973.
He currently serves as Chairman and Managing Director of Fourth Stockton
Company and Chairman of Currin-Patterson Properties LLC, both privately held
real estate investment companies.
Paul Fulton, 64, has been a director of the Company since 1994. He
currently serves as Chairman and Chief Executive Officer for Bassett Furniture
Industries, Inc. From January 1994 until 1997, Mr. Fulton served as Dean of the
Kenan-Flagler Business School of the University of North Carolina at Chapel
Hill. From July 1988 to December 1993, Mr. Fulton served as President of Sara
Lee Corporation. Mr. Fulton is currently a director of Sonoco Products, Bank
America Corporation, Lowes Companies, Inc., Bassett Furniture Industries, Inc.
and Hudson's Bay Company.
James H. Shaw, 70, has been a director of the Company since 1989. Mr.
Shaw was Chairman of Consolidated Ivey's, a regional department store chain,
from 1988 until his retirement in 1989, Chairman and Chief Executive Officer of
J. B. Ivey & Company from 1986 to 1988 and Chairman and Chief Executive Officer
of Ivey's Carolinas from 1983 to 1986.
A. F. (Pete) Sloan, 69, has been a director of the Company since 1994.
Mr. Sloan was Chairman of the Board of Lance, Inc. where he was employed from
1955 until his retirement in 1990. Mr. Sloan is currently a director of Bassett
Furniture Industries, Inc. and Richfood Holdings, Inc.
The seven continuing members of the Board of Directors are divided
into two classes with current terms expiring in 2000 and 2001, respectively. On
the expiration of each director's term, his successor in office will be elected
for a three year term. The terms of Ms. Clarice Cato Goodyear and Messrs. John
P. Derham Cato, Paul Fulton and James H. Shaw expire in 2000. The terms of
Messrs. Thomas E. Cato, George S. Currin and A. F. (Pete) Sloan expire in 2001.
DIRECTORS' COMPENSATION
Directors, who are not employees of the Company, receive a fee for
their services of $18,000 per year payable at the rate of $1,500 per month and
are reimbursed for reasonable expenses incurred in attending director meetings.
Non-employee directors also receive $125 per hour or a maximum of $1,000 per
day for attending special meetings or for additional services.
MEETINGS AND COMMITTEES
During the fiscal year ended January 30, 1999, the Company's Board of
Directors held 4 meetings.
The Company's Audit Committee reviews the Company's internal controls
and confers with the Company's independent auditors concerning the scope and
results of their audits and any recommendations they may have and considers
such other matters relating to auditing and accounting as the Committee may
deem appropriate. During the fiscal year ended January 30, 1999, the Audit
Committee held two meetings. Ms. Clarice Cato Goodyear and Messrs. Wayland
5
<PAGE> 9
H. Cato, Jr., Hamrick, Bradshaw, Currin, Fulton, Shaw and Sloan are members of
the Audit Committee.
The Company's Compensation Committee reviews and approves the
compensation of the executive officers of the Company. The Compensation
Committee held one meeting during the fiscal year ended January 30, 1999. Ms.
Clarice Cato Goodyear and Messrs. Wayland H. Cato, Jr., Bradshaw, Currin,
Fulton, Hamrick, Shaw and Sloan are members of the Compensation Committee.
SUMMARY COMPENSATION TABLE
The table below sets forth the compensation for the persons who were
at January 30, 1999 the Company's Chief Executive Officer and four other most
highly compensated executive officers.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION (1) COMPENSATION
---------------------------------- AWARDS
SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($) OPTIONS ($)
- ----------------------------------- ---------- ----------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Wayland H. Cato, Jr. 1998 $481,901 $500,000 -- $136,691(3)
Chairman of the Board and 1997 442,977 225,000 -- --
Chief Executive Officer 1996 449,504 -- -- --
John P. Derham Cato 1998 480,540 500,000 200,000 (4) --
Vice Chairman of the Board 1997 424,454 212,500 300,000 (4) --
President and 1996 304,920 40,000 -- --
Chief Operating Officer
B. Allen Weinstein (5) 1998 316,456 162,500 -- 35,000(6)
Executive Vice President 1997 129,859 37,500 75,000 (7) --
Chief Merchandising Officer 1996 -- -- -- --
of the Cato Division
David Kempert 1998 229,653 117,500 -- --
Executive Vice President 1997 219,538 67,500 30,000 (7) --
Chief Store Operations Officer 1996 207,692 20,000 -- --
of the Cato Division
C. David Birdwell (8) 1998 215,745 112,500 -- --
Executive Vice President 1997 202,763 60,000 30,000 (7) --
President and General Manager 1996 49,683 25,000 20,000 (7) --
of the It's Fashion! Division
</TABLE>
- --------------
(1) No named executive officer received perquisites or other personal
benefits, securities or property which, in the aggregate, exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported
for the named executive officer.
(2) Does not include amounts deducted pursuant to Internal Revenue Code
Section 125.
(3) Represents life insurance premiums paid pursuant to a "split dollar"
agreement.
(4) Options to purchase Class B Stock were granted to the named executive
officers at the fair market value of the Class B Stock on the date of
grant. The options vest in equal amounts over five years from the date
of grant and expire ten years from the date of grant.
6
<PAGE> 10
(5) Mr. Weinstein joined the Company on August 18, 1997.
(6) Represents amount paid for relocation expenses.
(7) Options to purchase Class A Stock were granted to the named executive
officers at the fair market value of the Class A Stock on the date of
grant. The options vest in equal amounts over five years from the date
of grant and expire ten years from the date of grant.
(8) Mr. Birdwell joined the Company on September 30, 1996.
SEVERANCE AGREEMENT
The Company has a severance agreement with Mr. Weinstein which
currently provides for the continuation of his salary for 12 months upon the
termination of his employment without cause.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR-END OPTION VALUES
The following table summarizes options exercised by the named
executive officers during the fiscal year ended January 30, 1999 and presents
the value of unexercised options held by the named executives at the end of the
fiscal year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT FISCAL OPTIONS AT
ACQUIRED YEAR-END (#) FISCAL YEAR-END ($)(1)
ON VALUE ------------------------- --------------------------
EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------------ ------------- ------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Wayland H. Cato, Jr. -- -- 216,666 (E) 208,812 (E)
-- (U) -- (U)
John P. Derham Cato -- -- 186,000 (E) 140,348 (E)
459,000 (U) 99,672 (U)
B. Allen Weinstein -- -- 15,000 (E) 5,156 (E)
60,000 (U) 20,625 (U)
David Kempert 12,000 117,720 42,000 (E) 35,948 (E)
41,000 (U) 23,614 (U)
C. David Birdwell -- -- 14,000 (E) 31,293 (E)
36,000 (U) 52,095 (U)
</TABLE>
- ----------
(1) Value is based on difference between exercise price and market price
of the underlying securities as of January 29, 1999.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning certain options
granted by the Company to the named executive officers during the fiscal year
ended January 30, 1999:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED OF BASE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------- ------------- ------------------ -------------------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Wayland H. Cato, Jr. -- -- -- -- -- --
John P. Derham Cato (1) 200,000 66.2% 13.06 2/26/08 1,642,661 4,162,849
B. Allen Weinstein -- -- -- -- -- --
David Kempert -- -- -- -- -- --
C. David Birdwell -- -- -- -- -- --
</TABLE>
- ------------
(1) Options granted under the Company's Non-Qualified Stock Option Plan to
purchase Class B Stock at the fair market value of the Class B Stock
on the date of grant. The options vest in equal amounts over five
years from the date of grant and expire ten years from the date of
grant.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The following report submitted by the Compensation Committee and Stock
Option Committee of the Board of Directors addresses the Company's executive
compensation policies for fiscal 1998.
The Compensation Committee is composed of eight members--six outside
directors, the Chief Executive Officer and the Special Assistant to the
Chairman and President and Assistant Secretary. The Compensation Committee
provides guidance for the Company's executive compensation programs to insure a
direct relationship between executive compensation and corporate performance.
The Stock Option Committee is composed of the six outside members of
the Board of Directors. The Stock Option Committee makes final decisions
regarding stock option awards made under the Company's plans.
The Company's executive compensation program has been designed (i) to
provide compensation equivalent to compensation offered by peer group companies
thereby allowing the Company to attract and retain the most qualified
executives, (ii) to motivate executive officers by rewarding them for attaining
pre-established Company financial goals and individual performance goals and
(iii) to align the interest of executive officers with the long-term interest
of stockholders.
In designing the compensation packages for executive officers, the
Compensation Committee and Stock Option Committee compare the Company's
executive officer compensation
8
<PAGE> 12
packages with peer group executive officer compensation packages, some of which
are included in the Dow Jones Specialty Apparel Market Index plotted in the
performance graph. Peer group companies which are similar in size and operate
in the specialty apparel retail market are given particular consideration. The
Compensation Committee and Stock Option Committee also consider the views of
the Company's outside retail consultants as well as industry benchmark
compensation surveys by William M. Mercer, Inc. and the National Retail
Federation concerning appropriate compensation levels for executive officers.
The executive compensation program is focused on attainment of
profitability and enhancement of stockholder equity. Currently, the Company's
executive compensation program consists of three principal types of
compensation: annual base salary, incentive bonuses and long-term stock option
awards. Executive officers are rewarded when the Company achieves financial
goals related to total revenues, net income, return on equity and expense
management and when the executive officer achieves individual performance goals
related to the executive officer's specific area of responsibility.
Annual Base Salary - The annual base salary of each executive officer
is based on the scope of his or her responsibility and accountability. Each
year the Compensation Committee determines the base salary for each executive
officer taking into consideration whether the executive officer achieved his or
her individual performance goals established for the prior fiscal year.
Incentive Bonus - A significant component of an executive officer's
total cash compensation consists of an incentive bonus based largely on the
Company's achievement of its planned net income goal and the achievement by
each executive officer of certain objective performance goals. The performance
criteria used in establishing the incentive bonus of an executive officer vary
depending on specific areas of responsibility but are closely tied to the
financial goals of the Company. A bonus accrual is made based on the
achievement of corporate financial goals. If corporate financial goals are not
achieved, the accrual may be reduced or eliminated.
No weighting is applied to the criteria established for each executive
officer. If an executive officer achieves all of his or her performance goals
and if the Company's profit plan is achieved, the executive officer is eligible
to receive an incentive bonus. In the event an executive office achieves some,
but not all, of the performance goals, he or she is eligible to receive a bonus
of a portion of the executive officer's potential maximum bonus.
An individual executive officer's bonus for a fiscal year is based
primarily on the Chief Executive Officer's evaluation and the Chief Operating
Officer's evaluation of that executive officer's performance in relation to the
applicable goals established for that executive officer and corporate
profitability.
Long-Term Stock Option Awards - Stock options are awarded by the Stock
Option Committee under the Company's Incentive Stock Option Plan and
Non-Qualified Stock Option Plan to executive officers to provide incentive for
the executive officer to focus on the Company's future financial performance
and as a means to encourage an executive officer to remain with the Company.
The stock option exercise price is 100% of the fair market value of the shares
on the date of grant and the stock options vest in 20% increments over five
years. Stock option grants are made when executive officers join the Company
and thereafter at the discretion of the Stock Option Committee.
9
<PAGE> 13
The Compensation Committee and Stock Option Committee recognize that,
to varying degrees, the determination of an executive officer's compensation
package involves subjective considerations.
CHIEF EXECUTIVE OFFICER
The Compensation Committee, without the presence of Mr. Wayland H.
Cato, Jr., and the Stock Option Committee discuss and determine the
compensation package for the Chief Executive Officer by comparing his
compensation package to the Chief Executive Officer compensation packages of
the peer group while considering the views of the Company's outside retail
consultants as well as the previously mentioned industry benchmark surveys. The
Compensation Committee and Stock Option Committee also take into consideration
years of service, specialty retail apparel experience, leadership, dedication
and vision.
This report has been provided by the Compensation Committee and Stock Option
Committee:
Wayland H. Cato, Jr.*
Clarice Cato Goodyear*
Robert W. Bradshaw, Jr.
George S. Currin
Paul Fulton
Grant L. Hamrick
James H. Shaw
A. F. (Pete) Sloan
* Compensation Committee only
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Goodyear and Messrs. Wayland H. Cato, Jr., Currin, Fulton, Shaw,
Bradshaw, Hamrick and Sloan served as members of the Compensation Committee
during fiscal 1998. Mr. Cato served as Chief Executive Officer and Chairman of
the Company during fiscal 1998. Ms. Goodyear served as Special Assistant to the
Chairman and President and as Assistant Secretary of the Company during fiscal
1998. Ms. Goodyear and Mr. Wayland H. Cato, Jr. are the only officers of the
Company who serve on the Compensation Committee.
The Company has ten lease agreements with entities in which Mr. Currin
has an interest. Four lease agreements were signed in 1995, four were signed in
1994 and two were signed in 1998. The lease term of each agreement is for
approximately 10 years with renewal terms at the option of the Company. The
Company believes that the terms and conditions of the Lease Agreements are
comparable to those which could have been obtained from unaffiliated leasing
companies.
During 1998, the Company paid to the entities in which Mr. Currin has
an interest, the amount of $552,098 for rent and related charges.
The firm of Robinson, Bradshaw & Hinson, P.A., of which Robert W.
Bradshaw, Jr., a director of the Company is a shareholder, was retained to
perform legal services for the Company during the last fiscal year. It is
anticipated that the firm will continue to provide legal services to the
Company during the current fiscal year.
10
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares the yearly change in the Company's
cumulative total shareholder return on the Company's Common Stock (which
includes Class A Stock and Class B Stock) for each of the Company's last five
fiscal years with (i) the Dow Jones Equity Market Index, (ii) the Dow Jones
Specialty Apparel Market Index and (iii) an index of seven (7) peer companies.
The peer group includes Braun's Fashions, Catherines Stores Corporation,
Charming Shoppes, Inc., Deb Shops, Inc., The Dress Barn, Inc., Paul Harris
Stores, Inc., and United Retail Group, Inc. The Company has chosen to use this
peer group index in its performance graph because management believes the peer
group index is a better reflection of the Company's competitors in the market
place.
[STOCK PERFORMANCE GRAPH]
THE CATO CORPORATION
STOCK PERFORMANCE TABLE
(BASE 100-IN DOLLARS)
<TABLE>
<CAPTION>
LAST TRADING DAY THE CATO D. J. EQTY D.J. SPC PEER
OF THE FISCAL YEAR CORPORATION MKT INDEX APPL MKT GROUP
- ------------------ ----------- --------- -------- ------
<S> <C> <C> <C> <C>
1/28/94 100.00 100.00 100.00 100.00
1/27/95 48.86 100.60 90.36 63.876
2/2/96 44.74 139.53 105.26 43.858
1/31/97 24.43 176.50 123.62 88.444
1/30/98 69.47 224.44 202.41 96.633
1/29/99 52.48 298.00 375.31 93.813
</TABLE>
The graph assumes an initial investment of $100 on January 28, 1994,
the last trading day prior to the commencement of the Company's 1994 fiscal
year and reinvestment of all dividends.
11
<PAGE> 15
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as
independent auditors to examine the Company's financial statements for the
fiscal year ended January 29, 2000. This selection is being presented to the
stockholders for their ratification at the annual meeting. Deloitte & Touche
LLP examined the Company's financial statements for the fiscal years ended
January 30, 1999 and January 31, 1998. A representative of Deloitte & Touche
LLP is expected to attend the meeting, respond to appropriate questions from
stockholders present at the meeting and, if such representative desires, to
make a statement. The affirmative vote of a majority of the votes present or
represented at the annual meeting and entitled to vote by the holders of Class
A Stock and Class B Stock, voting as a single class, is required to approve the
proposal. The directors recommend that stockholders vote FOR the proposal to
ratify the selection of Deloitte & Touche LLP as the Company's independent
auditors.
STOCKHOLDER PROPOSALS
Shareholders who intend to present proposals for consideration at next
year's annual meeting are advised that, pursuant to rules of the Securities and
Exchange Commission, any such proposal must be received by the Secretary of the
Company at the Company's principal executive offices, 8100 Denmark Road,
Charlotte, North Carolina 28273-5975 no later than the close of business on
December 27, 1999 if such proposal is to be considered for inclusion in the
proxy statement and proxy appointment form relating to that meeting. Only
persons who have held beneficially or of record at least $2,000 in market
value, or 1% of the combined class of Class A and Class B Common Stock, for at
least one year on the date the proposal is submitted and who continue in such
capacity through the meeting date are eligible to submit proposals to be
considered for inclusion in the Company's proxy statement. In addition,
pursuant to rules of the Securities and Exchange Commission, the Company may
direct the persons named in the Company's proxy with respect to next year's
annual meeting to exercise discretionary voting authority to vote against any
matter, without any disclosure of such matter in the Company's proxy statement,
if notice of such matter is received by the Secretary of the Company later than
the close of business on March 9, 2000.
OTHER MATTERS
The Board of Directors of the Company knows of no matters which will
be presented for consideration at the meeting other than those set forth in
this proxy statement. However, if any other matters are properly presented for
action, it is the intention of the persons named in the proxy to vote on them
in accordance with their best judgment.
For the Board of Directors
THE CATO CORPORATION
MICHAEL O. MOORE
April 22, 1999 Secretary
12
<PAGE> 16
* FOLD AND DETACH HERE *
================================================================================
Class A Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
PROXY
THE CATO CORPORATION
The undersigned hereby appoints Wayland H. Cato, Jr., Michael O. Moore and
Clarice Cato Goodyear, and each of them, with full power of substitution,
attorneys and proxies to appear and vote, as indicated below, all of the shares
of Class A Common Stock of The Cato Corporation that the undersigned would be
entitled to vote at the annual meeting of stockholders of The Cato Corporation
to be held on May 20, 1999, and at any and all adjournments thereof. The Board
of Directors recommends a vote FOR the following items:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as indicated to the contrary to vote for all nominees
Nominees: Messrs. Wayland H. Cato, Jr., Edgar T. Cato, Howard A. Severson,
Robert W. Bradshaw, Grant L. Hamrick
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through that nominee's name in the list provided above.)
2. RATIFICATION OF THE ACTION OF THE BOARD OF DIRECTORS IN SELECTING DELOITTE &
TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JANUARY 29, 2000; AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
<PAGE> 17
* FOLD AND DETACH HERE *
================================================================================
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL PROPOSALS AND "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR.
DATED:____________________________________
__________________________________________
__________________________________________
Signature
Please sign exactly as your name appears
hereon. If the holder named hereon is a
corporation, partnership or other
association, please sign its name and add
your own name and title. When signing as
attorney, executor, administrator, trustee
or guardian, please also give your full
title. If shares are held jointly, EACH
holder should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY SO AS TO INSURE A
QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
<PAGE> 18
* FOLD AND DETACH HERE *
================================================================================
Class B Common Stock
This Proxy is Solicited on Behalf of the Board of Directors
PROXY
THE CATO CORPORATION
The undersigned hereby appoints Wayland H. Cato, Jr., Michael O. Moore and
Clarice Cato Goodyear, and each of them, with full power of substitution,
attorneys and proxies to appear and vote, as indicated below, all of the shares
of Class B Common Stock of The Cato Corporation that the undersigned would be
entitled to vote at the annual meeting of stockholders of The Cato Corporation
to be held on May 20, 1999, and at any and all adjournments thereof. The Board
of Directors recommends a vote FOR the following items:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as indicated to the contrary to vote for all nominees
Nominees: Messrs. Wayland H. Cato, Jr., Edgar T. Cato, Howard A. Severson,
Robert W. Bradshaw, Grant L. Hamrick
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through that nominee's name in the list provided above.)
2. RATIFICATION OF THE ACTION OF THE BOARD OF DIRECTORS IN SELECTING DELOITTE &
TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JANUARY 29, 2000; AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
<PAGE> 19
* FOLD AND DETACH HERE *
================================================================================
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL PROPOSALS AND "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR.
DATED:____________________________________
__________________________________________
__________________________________________
Signature
Please sign exactly as your name appears
hereon. If the holder named hereon is a
corporation, partnership or other
association, please sign its name and add
your own name and title. When signing as
attorney, executor, administrator, trustee
or guardian, please also give your full
title. If shares are held jointly, EACH
holder should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY SO AS TO INSURE A
QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
